SEANAD:THE GOVERNMENT should follow the example of its British counterpart in facilitating the passage of legislation to curb top bankers' pay, Joe O'Toole (Ind) said.

"We should give, in legislation, the Minister for Finance the right to do certain things in his dealings with the banks. They should not be guidelines, words of advice or wish lists, but decisions with a statutory basis."

Referring to the controversy over the reported pending appointment of a new managing director of Allied Irish Bank, Mr O'Toole said there should be a process agreed by shareholders at an agm for this type of appointment.

"The simple question of whether they would get someone else interested in the position would be answered if they placed an advertisement in the international newspapers. Nobody needs to argue about the matter."

Shane Ross (Ind) said an appointment signposted by leaks raised the very serious issue of who made decisions in this country.

The Government and the Minister had made it clear, months ago, that this would be an external appointment. This had been stressed after the Bank of Ireland had pulled a stunt on the Minister by replacing its chief executive with an insider.

The Government and Mr Lenihan had signalled subsequently that they were going to show who was boss, but the banks had given them the two fingers and had said "we are not taking it from you".

This was an extraordinary challenge to the credibility of any government.

Having eye-balled the banks for six months, the Government had blinked. An AIB director had also been installed as chairman, so two insider appointments had been made.

The Government had been defied and was apparently going to accept what had happened.